Iraq's long-awaited licensing round to develop some of its massive oil reserves stumbled Tuesday as oil and gas companies dug in their heals, demanding more money for their efforts than the government was willing to pay.
International oil companies were submitting bids for six oil and two gas fields more than 30 years after Saddam Hussein nationalized the oil sector and expelled foreign firms. The televised process coincided with Iraq assuming formal control over its cities -- a step toward ending the US combat role in the country.
But by midday, only one field had been awarded and several others drew limited to no interest. The government was hoping that the high-profile licensing round -- televised to prove its transparency -- would result in companies flooding in, bringing their expertise as the country looks to boost output of a resource whose sales bring in 90 percent of the government's revenues. Some analysts have said companies may be unwilling to commit to major ventures in Iraq, opting to wait and see how the security situation develops after the US pullout from urban areas. Al-Maliki said at the start of the day's ceremony that the government would “offer security protection, offer all guarantees for their investments and offer all the facilities needed to ensure the success of this process.� Disputes over how much companies would get for producing over a minimum output target cast a pall on a process heralded as offering Iraq the key to rebuilding an economy devastated by years of sanctions and the 2003 US-led invasion. Iraq has about 115 billion barrels in crude -- among the world's largest deposits -- and the fields on offer account for roughly 43 billion barrels of those reserves. Two consortiums submitted offers for the Rumaila oil field, which holds 17.8 billion barrels in crude reserves. British BP PLC and China's CNPC made up the first consortium, while US Exxon Mobil and Malaysia's Petronas comprised the second.Under the service contracts, the companies would be paid a per barrel fee for any crude they produce in excess of a minimum production target. The Exxon Mobil-led consortium requested $4.8 per barrel for production over the minimum and BP wanted $3.99 per barrel, Oil Minister Hussain al-Shahristani said. The ministry was willing to pay $2 per barrel.